Offers in Compromise
We help clients with New York State and IRS Offers In Compromise programs to reduce their tax debt. Free consultation with Tax Attorney to discuss if you qualify for these programs to settle your back taxes.
If you are worried because you incurred substantial unpaid tax liabilities over the years, do not worry and agonize over this matter. We are here to help you find the best solution to this type of tax problem.
STATE AND IRS OFFER IN COMPROMISE PROGRAM
A State or IRS Offer In Compromise program is one solution that can give you hope if you have an outstanding tax debt. We are experts as tax attorneys in negotiating with the Internal Revenue Service, and the state tax departments, to have your tax liability reduced under the program, or in some rare cases we can help you eliminate the debt altogether. This result is often better than a payment plan to pay back the tax debt.
The IRS and State taxing authorities consider your current financial condition in determining whether you have the ability to pay the full amount of the debt owed to them. In order to “compromise” your tax liability for less than the full amount, the tax authorities require extensive financial documentation to prove your case, and compliance with a wide variety of rules, tax procedures, and tax regulations. The difference between the approval and rejection of your “Offer” is often the knowledge, experience and judgment of the tax attorney you hire to assist you.
The IRS will generally accept an “Offer” when based upon the evidence submitted, the government is unlikely to collect the liability owed in full, and the amount offered in the settlement equals at least the amount that the IRS calculates that it can collect from the taxpayer’s 1) equity in assets and 2) disposable monthly income over the statutory collection period. This determination is often referred to as the “reasonable collection potential.”
TYPES OF IRS OFFER IN COMPROMISE
The IRS may accept an “Offer” in compromise of a tax debt based on three main grounds:
Doubt as to Collectability – A reasonable doubt exists that the taxpayer can ever pay the full amount of liability owed within the remainder of the statutory collection period.
Example: A taxpayer owes $50,000 for unpaid tax liabilities and agrees that the tax owed is correct. The taxpayer’s monthly income does not meet her necessary living expenses. She does not own any real property and does not have the ability to pay the liability in full now, or through monthly installment payments.
Doubt as to Liability – A legitimate doubt exists that the assessed tax liability is correct and owed. Possible reasons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law, (2) the tax examiner failed to consider the taxpayer’s evidence presented, or (3) the taxpayer has new evidence to consider.
Example: The taxpayer was vice president of a corporation from 2006-2007. In 2009, the corporation accrued unpaid payroll taxes and the taxpayer was assessed a trust fund recovery penalty as a responsible party of the corporation. The taxpayer was no longer a corporate officer and had resigned from the corporation on 12/31/2007.
Exceptional Circumstances (a/k/a Effective Tax Administration) – When there is no doubt that the tax amount owed is correct, and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an Offer In Compromise. To be eligible for compromise under this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.
Example: Mr. Taxpayer has assets sufficient to satisfy the liability in full and agrees that he owes the tax, and he provide full time care and assistance to a dependent child, who has a serious long-term illness. It is expected that Mr. and Mrs. Taxpayer will need to use the equity in assets to provide for adequate basic living expenses and medical care for the child.
The IRS and State is not bound by either the offer amount or the terms proposed by the taxpayer when the taxpayer makes an offer to settle the taxes. The State or IRS Offer In Compromise investigator may negotiate a different offer amount and terms, when it is appropriate to your case. The investigator may determine that the proposed offer amount is too low or the payment terms are too protracted to recommend acceptance. In this situation, the Offer In Compromise investigator may advise your Tax Lawyer as to what larger amount or different terms (payment amount or payment dates) would likely be recommended for acceptance of the offer.
For taxpayers that qualify, an IRS Offer in Compromise program, or a States counterpart, is a great way to resolve the taxes owed, resulting in a fresh start with the IRS. However, the decision to make an Offer Compromise is very complicated and many factors need to be considered to properly analyze the situation. The success of your “Offer” depends on the proper application of the tax laws, experience with the IRS, and attention to all the detail of your case in order to get the best result for you.
By: Timothy S. Hart
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- IRS Partial Payment Installment Agreements vs. Offers In Compromise
- Letting a Tax Attorney Handle your offer in Compromise
- Offers in Compromise and Form 433-A (OIC)
- Useful Blog Articles Concerning Offers in Compromise
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We Can Help You No Matter Where You Live.
Our New York tax law firm offices are located in New York State but we are able to help you in any state across the country. We can work with you no matter where you live. Mr. Hart is licensed to deal with the IRS in every state in the entire country.